Friday, January 22, 2016

During 2015 most Ontario consumers experienced a 12% rise in the commodity price of electricity. The figure is higher than the 8% average annual increase over the past 8 years, but follows the trend of rate increases that was predictable, and if predictions had been heeded properly, largely preventable. In this post I'll note the actions driving the cost of a kilowatt-hour for the common Ontario ratepayer 85% higher over the past 8 years.

In my first post summarizing 2015 figures, I graphed the annual increases in the global adjustment and accompanied declines in the costs recovered through market sales. From 2007 to 2015 the total cost of electricity supply in Ontario grew from around $8.8 billion to $13.7 billion. The move away from recovering costs through market sales is important, but to find the most basic cost drivers we should first find elements of the $4.9 billion supply cost increase, and then explain the rate escalators taking the 55% increase in supply costs to an 85% increase in the supply price for most Ontario ratepayers.

Unexpecting the expected.

If cost increases still surprise some, it must be that the topic is too complicated for most, because clear warnings have existed. Price forecasting took a huge jump in Ontario with Bruce Sharp's August 2010 report prepared for the Canadian Manufactures & Exporters (CME). Prior to the report the price speculation attached to an escalated push into renewables came from the push's instigator, George Smitherman: "We anticipate about 1% per year of additional rate increase associated with the [Green Energy and Green Economy Act] bill’s implementation over the next 15 years." [2]Sharp's August 2010 estimates put the cost much higher - at about $30/megawatt-hour (MWh) for the renewables supply with additional cost for distribution and transmission charges due to the Green Energy and Green Economy Act. The provincial Long-Term Energy plans following Sharp's report seemed to adopt his numbers, and consequently his forecast altered the reality slightly. Nonetheless, 2015's enormous $9.96 billion global adjustment total is only 2% off the total Sharp predicted in a second report 4 years ago.

Up we went

In my second post summarizing 2015 figures I demonstrated my estimates, inclusive of cost for distribution-connected (Dx) supply, largely agreed with the planned expenditures attached to 2013's long-term energy plan. It is important to note the system operator [IESO] current reporting on 2015 totals is only for "supply connected to the high-voltage transmission [Tx] system." The IESO's Tx reporting, as I've previously communicated, provides an increasingly inadequate image of Ontario's electricity generation - and it's encouraging this is being recognized by sector commentators as diverse as Parker Gallant and Tyler Hamilton.
The following graphic demonstrates my estimates of all 2015 generation (including Dx) and related supply costs (including Dx and curtailment):

Calculation exclude other costs included in global adjustment (such as conservation spending". See footnote 1 data.

The IESO's failure to develop reporting on generation from contracted supply within local distribution networks is now missing reporting on about 10% of Ontario's supply costs - mostly attributable to solar panels.

Saturday, January 16, 2016

I have other blogs for other purposes: one aggregating articles from elsewhere; another for quick comments, or to work out one aspect of a bigger story, and an edgier blog intended to be meanly funnier in a way that could alienate some readers from my posts here. Today's post will draw on recent material from my other blogs as a petty squabble has reached an interesting data point.

The Toronto Star's Queen's Park columnist, Martin Regg Cohn (MRC), has been working to downplay the recent report from Ontario's Auditor General on the electricity cost impacts of the province's failure to adhere to the professional Electricity Power System Planning it had designed and introduced.[1] MRC's latest column is titled "Why cheap hydro was too good to be true."

For perspective on the Star's "too good to be true" perspective, one might look at the trend over 50+ years in the country just south of us.

MRC's column today ends with "we can grapple with our electricity reality — a prerequisite to generating better outcomes." Presumably, if one were a grappler, one might look to Q & A for Ontario’s hydro system from the Star's "Queen's Park Bureau Chief Robert Benzie and Queen's Park Bureau reporter Rob Ferguson - but that would be a mistake. Here's their first point:

How is Ontario's Electricity Generated?The majority of Ontario’s electricity — 60 per cent last year — comes from nuclear reactors at Bruce, Darlington, and Pickering. Almost a quarter — 24 per cent — is from hydro-electricity from places like Niagara Falls, while 10 per cent comes from natural gas-powered generating plants. Only 6 per cent is from wind, and less than 1 per cent comes from solar, with a similar amount of electricity generated by biofuels.

Monday, January 4, 2016

The electricity sector data widely communicated by the system's operator (the IESO) is increasingly inadequate for analysis of cost and demand trends in the province. This post needs to utilize more obscure data, and the creation of some data through estimates, in order to demonstrate the causes of overall higher prices and the shifting of costs to the smallest consumers of electricity. 2015 continues a trend of rising overall electricity costs, and the increases are amplified by 50% for small consumers.

Consumers can be broadly grouped into three groups: exporters, Class A and Class B. In 2015 a new website appeared that does provide a quarterly report indicating the much different pricing for Class A consumers ("large electricity consumers"), and all other domestic consumers - Class B.
Up to the end of the September the total pricing for the classes was quite different: Class A had averaged $6.24 cents per kilowatt-hour ($62.40/MWh), which was 37% lower than Class B's 9.89 cent/kWh average.

To understand the cost drivers it's useful to first examine the difference between the forms of generation the IESO considers "Ontario Demand", and the metered consumption of Ontario consumers.

The IESO provides, upon requests, figures for "consumption" by the consumer classes defined by the global adjustment mechanism/s. With these figures, and the breakdown of the global adjustment totals by class A and class B published by the IESO, it is possible to recreate the reported average commodity rates. The widely cited "Ontario Demand" refers to demand for supply from transmission connected (Tx) generators. Other generators are connected within distribution grids (Dx). Consumption figures for December won't be available until after the global adjustment totals are finalized in mid-January, but we have enough data to estimate 2015 and demonstrate that over the past 5 years "consumption" in Ontario has gone from being less than "Ontario Demand" to exceeding it.

The change in the the difference between Tx generation ("Ontario Demand") and consumption means that generation is increasing within distribution (Dx) networks. It should be expected that Dx generation data be reported along with Tx data to properly communicate component supply costs.

Sunday, January 3, 2016

I'm hoping to produce 3 posts for the new year. This one will be more familiar for long time readers as I try to keep it constrained to data that is freely and widely available. A second post will use my estimates of additional data to provide a fuller illustration of that state of Ontario's electricity sector in 2015, and the other will hopefully be more disruptive, connecting data to provincial, national and international events and personalities.

Ontario's simplest electricity data is hourly data from Ontario's electricity system operator (IESO) for demand, imports, exports and Hourly Ontario Energy Price (HOEP). Using only this hourly data annual "Ontario Demand" is indicated as lower than it's been since the market opened in 2002 - and using other data available on the IESO site the demand is lower than it's been for over 2 decades.
Curiosity took me back to a graphic in my first blog post, in 2010, which confirmed it has been a full quarter of a century since Ontario's generators produced less than the 137 million megawatt-hours (MWh) the IESO shows as "Ontario Demand" in 2015.

Ontario Generation is calculated, in the graph above, from the base IESO data as "Ontario Demand" plus "exports" less imports. As that generation exceeded provincial demand by more than ever in 2015, it's not surprising the weighted average market price (HOEP) set a record low at $23.58/MWh.

Record low pricing was accompanied by record high exports. Valued at hourly rates (except when negative after the banning of negative priced exports) revenues from exports look to have been 56% lower than in 2008 - the previous record export volume.